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  • Analytický komentár

Nowcasting wage growth in Slovakia

  • Karšay Alexander
4 jún 2019
For the purposes of 1-quarter ahead wage forecast (wage nowcasting), the method of forecast combination (FC) has been our method of choice so far. This approach brings significantly better results compared with a simple ARMA model. However, we decided to also test a factor model approach (FM). In this analytical commentary, we provide more detailed information about both methods and compare their use for the purposes of a short-term wage forecast. Based on testing of the two methods, the results show that the FM is more appropriate to explain the drivers of current wage developments and to provide wage forecasts for periods T+1 and T+2. It also serves as a tool to extract fundamental information from many monthly indicators. For short-term forecasts of current quarter (T) wage developments, we continue to prefer the originally used FC method. Both methods under comparison will serve as useful complementary tools within our forecasts and analyses.